South Korea's $168 billion sovereign wealth fund is planning to allocate as much as a fifth of its portfolio to alternative assets such as tech ventures, as it bets that near-zero interest rates will stick around for a long time.
"In the mid-to-long term, our direction is to steadily increase our alternative assets, which are now around 16% (of our portfolio)," Heenam Choi, chief executive officer at Korea Investment Corp., said in an interview. "I think we can increase it to up to 20% within three years."
To boost that exposure, the fund is planning to open a new office in San Francisco in the next few months so it can invest in Silicon Valley ventures.
"Technological infrastructure is no longer something we will need but something we need right now because technology has become a big part of our lives," he added.
During the year, the fund invested money in stay-at-home stocks that benefited during the COVID-19 pandemic, including Peloton Interactive Inc., a fitness technology company whose stock got a 408% boost from coronavirus lockdowns, and cybersecurity company Zscaler Inc., which rallied 329%.
Mr. Choi said that people have become used to the convenience of technology in areas like online shopping. Stay-at-home stocks will continue to thrive once vaccines are distributed, he noted.
The fund will keep looking for opportunities to add Chinese tech stocks to its portfolio and is not worried about the rising discord between the world's two largest economies for now.
"If technological tensions between China and the U.S. escalate, we have to think about it (our Chinese tech investments), but at this stage, we aren't changing our positions," he said.
Here are some other points Mr. Choi made:
- The fund is maintaining its overweight position in global equities.
- In the short-term, the discrepancy between markets and underlying economies will continue; economies could normalize in 2022 and 2023.
- The dollar is going to be weak for a while as more money leaves the U.S. for emerging markets on expectations that economies will recover.
- Near-zero interest rates will remain for a long time.
- Global equity markets may rally next year, but probably not by double-digit levels like this year.
- The fund introduced various internal measures to boost ESG investing.